Red Lion Results

Red Lion 2016 Adjusted EBITDA Grows 56% to $19.5 Million

RLHC Reports Fourth Quarter and Full Year 2016 Results

Red Lion

Red Lion Hotels Corporation (NYSE:RLH) yesterday reported preliminary unaudited full year and fourth quarter 2016 results.

Preliminary Full Year 2016 Highlights:

  • GAAP net loss of $4.7 million compared to net income of $2.7 million in 2015
  • Grew 2016 Adjusted EBITDA by 56% to $19.5 million
  • Improved Adjusted Net Loss per share to $(0.19) per share as compared to $(0.40) per share in 2015
  • Achieved system-wide comparable RevPAR growth of 2.9% with strong annual RevPAR growth contributions from mid-scale franchise and economy franchise segments of 5.7% and 7.2%, respectively
  • Increased franchise segment revenues over 100%
  • Completed $26 million in renovations to reposition hotels owned through joint ventures
  • Executed 86 new franchise agreements across legacy RLHC and recently acquired brands
  • Completed transformative acquisition placing RLHC in the top ten hotel franchise companies in the country with over 1,100 hotels and 73,000 rooms

Preliminary Fourth Quarter 2016 Highlights:

  • GAAP net loss of $2.3 million compared to a net loss of $6.3 million in 2015
  • Adjusted EBITDA improved to $2.8 million from negative $0.6 million in 2015
  • Improved Adjusted Net Loss per share to $(0.20) per share as compared to $(0.31) per share in 2015 
  • Achieved systemwide RevPAR growth of 0.3%, with growth in the economy franchise of 11.4% and mid-scale franchise of 3.3%
  • Raised $20.0 million of equity to support growth initiatives
  • Signed 42 new franchise agreements

"Our most recent results mark a strong finish to a formative year for RLHC - we continued our transformation to an asset light model and substantially grew our franchise business with our recent acquisition that enabled us to establish a national and international presence. These strategic actions further broadened our brand offerings, with the addition of multiple brands and over 1,000 franchised hotels. More importantly it has raised awareness for RLHC within the lodging industry and is generating attention from hoteliers interested in joining our growing platform," said RLHC President and Chief Executive Officer Greg T. Mount.

"As we look toward 2017, we are focused on completing the integration of the recently acquired brands while further developing and scaling our industry leading guest management system, RevPak, to appropriately match each brand's unique requirements. These efforts, coupled with a larger franchise development team deployed to identify and deepen RLHC's mid and upscale presence, should enable us to execute roughly 90 to 120 additional hotel franchise agreements in 2017.  With an asset light model, additions to our unit count will be an increasingly important metric for RLHC.  Over the past two years, RLHC has made significant progress in growing its brands and franchise network and we look forward to building on those efforts this year," concluded Mr. Mount.

Preliminary Full Year and Fourth Quarter 2016 Results

The company is issuing preliminary unaudited results for the full year and fourth quarter 2016.  The company has identified a material weakness in its internal controls over financial reporting related to the ticketing portion of the entertainment segment.  The company has implemented additional controls to eliminate this control weakness.  The company does not believe this issue will have a material impact on its 2016 or 2015 operating results, nor will it impact future results, but it could result in an adjustment to a prior year.  RLHC is working diligently to have the matter resolved in a timely manner. Upon completion, the company will issue final 2016 fourth quarter and full year results and file its 2016 Annual Report on Form 10-K.

Preliminary Financial Results

RLHC reported a consolidated net loss for the year of $4.7 million as compared to consolidated net income of $2.7 million in 2015.  Consolidated diluted net loss per share for the year was $(0.23) as compared to net income per diluted share of $0.13 for 2015.  Net income was impacted on a year over year basis resulting from a gain of $16.4 million in 2015 from the sale of its Bellevue and Wenatchee properties.  For the quarter ended December 31, 2016, the company reported a net loss of $2.3 million as compared to a net loss of $6.3 million in the fourth quarter of 2015.  Net loss on a diluted share basis was $(0.11) per share for the quarter as compared to net loss of $(0.32) per share in the prior year period.

RLHC produced a significant improvement in consolidated net loss for the year after adjusting for special items (including the aforementioned gain on sale) to $(3.9) million as compared to a net loss of $(7.9) million for 2015. On a per share basis, adjusted net loss for 2016 was $(0.19) as compared to net loss per share of $(0.40)in 2015.  For the quarter ended December 31, 2016, net loss after special items was $(4.2) million and $(0.20) on a per share basis as compared to $(6.1) million and $(0.31) per share, respectively for the fourth quarter 2015.

Total revenues for the company increased 14.8% for 2016 on a year-over-year basis to $164.1 million. The growth was driven by a 3% increase in company operated hotel revenues to $124 million and a strong franchise revenue growth contribution of 105% or $24.6 million, reflecting both organic initiatives, including the opening of 11 franchised hotels, in addition to the Vantage acquisition. Entertainment revenues rose to $15.7 million or 42% over 2015, primarily driven by sales related to an unusually strong spring touring season, which is not expected to recur in 2017.

For the quarter-ended December 31, 2016, total revenues increased by 24% to $40.8 million.  Excluding the contribution of the acquisition to the quarter, total revenues for fourth quarter 2016 were $32.0 million, down 3% from the prior year period at $32.9 million.  Franchise revenue in the quarter rose to $12.4 million from $2.9 million in the fourth quarter of 2015.  Excluding the newly acquired brands, franchise revenues grew roughly 23% to $3.6 million.  Company operated hotel revenue in the fourth quarter declined 3% year-over-year to $25.6 million from the prior year period.  The underperformance reflects primarily continued disruption in the company's transient business from the extensive renovation programs.  Entertainment revenues in the fourth quarter were $2.7 million compared to $3.5 million in the prior year quarter, reflecting a reduced number of shows available for touring.

After consideration for several one-time items, Adjusted EBITDA grew 56% for the year to $19.5 million, in-line with guidance, as compared to $12.5 million in 2015.  For the quarter ended December 31, 2016, Adjusted EBITDA was $2.8 million as compared to a loss of $0.6 million.  Adjustments to EBITDA included certain one-time items such as: employee separation and transition costs associated with the departure of the company's former Chief Financial Officer, gain on the sale of assets related specifically to the Coos Bay hotel, environmental reserves and acquisition costs associated with the recently acquired brands.

Operational Results

For 2016, RLHC achieved system-wide RevPAR growth of 2.9%.  After adjusting for the disruption to the renovated hotels, RevPAR growth would have been approximately 3.4% or slightly ahead of the industry RevPAR of 3.2%.  Results were driven by strong performance from the company's mid-scale franchise and economy franchise segments which delivered RevPAR growth of 5.7% and 7.2%, respectively, while company operated comparable hotels RevPAR declined by 0.7% due to the previously disclosed disruption from extensive renovation programs that coincided with the company's strongest seasons.   The renovations are now complete and the company expects performance of these hotels to be comparable to or stronger than hotels in its market-specific competitive set.  For the fourth quarter, system-wide RevPAR growth was 0.3% with RevPAR growth for mid-scale franchise and economy franchise coming in at 3.3% and 11.4%, respectively.   This was offset by company comparable operated hotels with a RevPAR decline of 5.9%.

Strength in RLHC franchised hotels revenue can be attributed to the full deployment of and continued innovations to RLHC's proprietary guest and revenue management system, RevPak.  The company is evaluating the most effective ways this system can be deployed and adapted throughout the broader brand platform as part of the integration process.

Contributing to RLHC's operational results in 2016 was the continued success of the company's innovative customer recognition program, Hello Rewards.  Revenue generated from rooms booked via the Hello Rewards program increased over 80% as compared to 2015, with membership growth of roughly 50% during the year.

Brand Portfolio Developments

As previously communicated, in late September 2016, RLHC acquired substantially all of the assets of Vantage Hospitality for an initial payment of $22.6 million in cash and $5.8 million in stock with additional potential performance-related contingent payments of up to $7 million in cash and 690,000 shares of stock to be paid over the subsequent twenty-four months. The acquisition added over 1,000 franchised hotels and over 58,000 rooms in the U.S., Canada and Asia.

In addition to Vantage, over the course of the year, RLHC accretively expanded its network through numerous hotel openings and through the completion of franchise executions from non-RLHC brands, as well as conversions from Red Lion Hotels to Hotel RLs within the system. During the fourth quarter, the company executed 28 franchise agreements, and opened 13 new franchised hotels.  As previously announced, for the year, the combined platforms signed 86 franchise license agreements and opened 68 hotels.

Balance Sheet, Liquidity and Capital Markets Activities

At December 31, 2016, the company had $38.1 million in cash and cash equivalents and $9.5 million in restricted cash. Additionally, at December 31, 2016, the company had net outstanding debt of $108.3 million, borrowed by the company's joint venture entities; RLHC's pro rata share of the debt is $61.9 million.  At year end, the company's net debt to Adjusted EBITDA ratio was 1.4.

On December 15, 2016, RLHC sold 2.5 million shares of its common stock at a public offering price of $8.00 per share, for net proceeds of approximately $18.5 million. The primary use of the proceeds was the replenishment of cash reserves used to complete the acquisition.

Capital expenditures for the year-ended December 31, 2016, totaled $33.5 million, the majority of which was funded with proceeds from debt financing associated with the company's joint ventures.

Subsequent Events

Subsequent to December 31, 2016, RLHC opened two franchise hotel RLs, one in Brooklyn, New York and the other in Omaha, Nebraska bringing the total opened Hotel RL count to seven since the launch of the brand, with three franchise locations currently under development and construction and the fourth, a conversion franchise property, expected to open in the second half of 2017.

On March 1, 2017, RLHC announced the appointment of Douglas L. Ludwig as its Executive Vice President and Chief Financial Officer.  Mr. Ludwig, a lodging industry veteran was most recently with Baha Mar Resorts Limited as its Chief Financial Officer and prior to that spent more than two decades with Four Seasons in various roles, including most recently as Chief Financial Officer for 13 years.  During his time with Four Seasons, Mr. Ludwig oversaw the successful and rapid growth of the brand into one of the leading luxury hotel companies.  Mr. Ludwig will provide the company with valuable insights into the lodging and franchise market.  His experience and leadership in building top finance and accounting teams will be extremely valuable as RLHC pursues its long-term growth strategy.  Mr. Ludwig is expected to join the company by the end of March.

2017 Outlook

Based on the outlook for the markets in which the company operates, and its current expectations, the following financial guidance for 2017 is being provided:

  • Adjusted EBITDA range of $21 to $23 million
  • Capital expenditures range of $11 to $13 million
  • Full year Systemwide RevPAR growth of 1.0% to 3.0%
  • Executed franchise license agreements of 90 to 120

The outlook does not contemplate acquisitions or dispositions during the year and does not anticipate any capital markets activity, except for the issuance of up to 414,000 shares of common stock on the anniversary of the closing of Vantage.  These additional shares will be added to the share count for the last 93 days in 2017.

About RLHC

Red Lion Hotels Corporation, established in 1959, is an international hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels under the Hotel RL, Red Lion Hotels, Red Lion Inn & Suites, GuestHouse, Settle Inn, Vantage Hotels, Americas Best Value Inn, Canadas Best Value Inn, Lexington by Vantage, America's Best Inns & Suites, Country Hearth Inns, Jameson Inn, Signature Inn and 3 Palms Hotels & Resorts brands. The company also owns and operates an entertainment and event ticket distribution business under the brand name TicketsWest.

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except per share amounts)
               
  Three Months Ended December 31,        
  2016   2015   $ Change   % Change
Revenue:              
Company operated hotels $ 24,126     $ 25,094     (968 )   (3.9 )
Other revenues from managed properties 1,450     1,312     138     10.5  
Franchised hotels 12,440     2,916     9,524     326.6  
Entertainment 2,706     3,521     (815 )   (23.1 )
Other 87     13     74     569.2  
Total revenues 40,809     32,856     7,953     24.2  
Operating expenses:              
Company operated hotels 20,537     23,479     (2,942 )   (12.5 )
Other costs from managed properties 1,450     1,312     138     10.5  
Franchised hotels 9,280     2,739     6,541     238.8  
Entertainment 2,452     3,077     (625 )   (20.3 )
Other (2 )   8     (10 )   (125.0 )
Depreciation and amortization 4,927     3,711     1,216     32.8  
Hotel facility and land lease 1,197     1,481     (284 )   (19.2 )
Gain on asset dispositions, net (1,707 )   (1,101 )   (606 )   55.0  
General and administrative expenses 3,329     2,016     1,313     65.1  
Acquisition and integration costs 460     779     (319 )   (40.9 )
Total operating expenses 41,923     37,501     4,422     11.8  
Operating income (loss) (1,114 )   (4,645 )   3,531     (76.0 )
Other income (expense):              
Interest expense (2,011 )   (1,751 )   (260 )   14.8  
Loss on early retirement of debt     (1,689 )   1,689     (100.0 )
Other income, net 24     447     (423 )   (94.6 )
Other income (expense) (1,987 )   (2,993 )   1,006     (33.6 )
Income (loss) before taxes (3,101 )   (7,638 )   4,537     (59.4 )
Income tax expense (benefit) 54     48     6     12.5  
Net income (loss) (3,155 )   (7,686 )   4,531     (59.0 )
Net (income) loss attributable to noncontrolling interest 808     1,356     (548 )   (40.4 )
Net income (loss) attributable to RLHC (2,347 )   (6,330 )   3,983     (62.9 )
Earnings per share - basic              
Income (loss) attributable to RLHC $ (0.11 )   $ (0.32 )        
Earnings per share - diluted              
Income (loss) attributable to RLHC $ (0.11 )   $ (0.32 )        
Weighted average shares - basic 21,230     20,050          
Weighted average shares - diluted 21,230     20,050          
               
Non-GAAP Financial Measures:(1)              
EBITDA $ 3,837     $ (2,176 )   $ 6,013     276.3 %
Adjusted EBITDA $ 2,788     $ (629 )   $ 3,417     543.2 %
Adjusted net income (loss) $ (4,204 )   $ (6,139 )   1,935     31.5 %
(1) The definitions of "EBITDA", "Adjusted EBITDA" and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.

 

Red Lion Hotels Corporation
Consolidated Statements of Operations
(unaudited)
($ in thousands, except per share amounts)
               
  Year Ended December 31,        
  2016   2015   $ Change   % Change
Revenue:              
Company operated hotels $ 117,641     $ 116,187     1,454     1.3  
Other revenues from managed properties 5,948     3,586     2,362     65.9  
Franchised hotels 24,634     12,039     12,595     104.6  
Entertainment 15,719     11,057     4,662     42.2  
Other 128     51     77     151.0  
Total revenues 164,070     142,920     21,150     14.8  
Operating expenses:              
Company operated hotels 91,572     92,057     (485 )   (0.5 )
Other costs from managed properties 5,948     3,586     2,362     65.9  
Franchised hotels 19,315     11,233     8,082     71.9  
Entertainment 13,635     10,118     3,517     34.8  
Other 42     35     7     20.0  
Depreciation and amortization 16,281     13,315     2,966     22.3  
Hotel facility and land lease 4,740     6,569     (1,829 )   (27.8 )
Gain on asset dispositions, net (2,437 )   (17,692 )   15,255     (86.2 )
General and administrative expenses 11,109     9,819     1,290     13.1  
Acquisition and integration costs 2,112     779     1,333     171.1  
Total operating expenses 162,317     129,819     32,498     25.0  
Operating income (loss) 1,753     13,101     (11,348 )   (86.6 )
Other income (expense):              
Interest expense (6,764 )   (6,979 )   215     (3.1 )
Loss on early retirement of debt     (2,847 )   2,847     (100.0 )
Other income, net 483     826     (343 )   (41.5 )
Other income (expense) (6,281 )   (9,000 )   2,719     (30.2 )
Income (loss) before taxes (4,528 )   4,101     (8,629 )   (210.4 )
Income tax expense (benefit) 312     85     227     267.1  
Net income (loss) (4,840 )   4,016     (8,856 )   (220.5 )
Net (income) loss attributable to noncontrolling interest 163     (1,297 )   1,460     (112.6 )
Net income (loss) attributable to RLHC (4,677 )   2,719     (7,396 )   (272.0 )
Earnings per share - basic              
Income (loss) attributable to RLHC $ (0.23 )   $ 0.14          
Earnings per share - diluted              
Income (loss) attributable to RLHC $ (0.23 )   $ 0.13          
Weighted average shares - basic 20,427     19,983          
Weighted average shares - diluted 20,427     20,200          
               
Non-GAAP Financial Measures:(1)              
EBITDA $ 18,517     $ 24,395     $ (5,878 )   (24.1 )%
Adjusted EBITDA $ 19,472     $ 12,463     $ 7,009     56.2 %
Adjusted net income (loss) (3,885 )   (7,916 )   4,031     (50.9 )%
(1) The definitions of "EBITDA", "Adjusted EBITDA" and Adjusted net income (loss) and how those measures relate to net income (loss) are discussed further in this release under Non-GAAP Financial Measures.

 

Red Lion Hotels Corporation
Consolidated Balance Sheets
(unaudited)
($ in thousands, except per share data)
    December 31
    2016   2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 38,072     $ 23,898  
Restricted cash   9,537     11,304  
Short-term investments       18,085  
Accounts receivable, net   10,852     7,671  
Accounts receivable from related parties   1,865     493  
Notes receivable, net   1,295     929  
Inventories   647     721  
Prepaid expenses and other   4,491     2,149  
Total current assets   66,759     65,250  
Property and equipment, net   210,732     195,390  
Goodwill   12,566     8,512  
Intangible assets, net   52,854     15,301  
Notes receivable, long term       1,676  
Other assets, net   1,624     1,089  
Total assets   $ 344,535     $ 287,218  
LIABILITIES        
Current liabilities:        
Accounts payable   $ 8,682     $ 9,263  
Accrued payroll and related benefits   4,800     6,163  
Other accrued entertainment liabilities   10,134     9,211  
Other accrued liabilities   4,336     3,225  
Long-term debt, due within one year   1,469      
Contingent consideration for acquisition due to related party, due within one year   6,768      
Total current liabilities   36,189     27,862  
Long-term debt, due after one year, net of debt issuance costs   106,862     87,557  
Contingent consideration for acquisition due to related party, due after one year   4,432      
Deferred income   2,293     1,326  
Deferred income taxes   5,716     2,872  
Total liabilities   155,492     119,617  
Commitments and contingencies        
STOCKHOLDERS' EQUITY        
Preferred stock- 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding        
Common stock- 50,000,000 shares authorized; $0.01 par value; 23,434,480 and 20,051,145 shares issued and outstanding   234     201  
Additional paid-in capital, common stock   171,089     143,901  
Accumulated deficit   (14,787 )   (10,110 )
Total RLHC stockholders' equity   156,536     133,992  
Noncontrolling interest   32,507     33,609  
Total stockholders' equity   189,043     167,601  
Total liabilities and stockholders' equity   $ 344,535     $ 287,218  

 

RED LION HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
    2016     2015
    (In thousands)
Operating activities:        
Net income   $ (4,840 )   $ 4,016  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   16,281     13,315  
Amortization of debt issuance costs   1,166     935  
Gain on disposition of property, equipment and other assets, net   (2,437 )   (17,692 )
Loss on early retirement of debt       2,763  
Deferred income taxes   249     59  
Equity in investments   (157 )   55  
Stock based compensation expense   2,640     1,932  
Provision for doubtful accounts   433     654  
Fair value adjustments to contingent consideration   339      
Change in current assets and liabilities:        
Accounts receivable   (3,183 )   (1,901 )
Notes receivable   (110 )   (167 )
Inventories   74     234  
Prepaid expenses and other   (2,149 )   556  
Accounts payable   (1,006 )   3,381  
Other accrued liabilities   (1,738 )   5,944  
Net cash provided by operating activities   5,562     14,084  
Investing activities:        
Capital expenditures   (33,511 )   (16,542 )
Acquisition of Vantage Hospitality   (22,603 )    
Purchase of Atlanta hotel property held in joint venture       (6,421 )
Acquisition of Washington DC hotel business       (22,651 )
Purchase of GuestHouse International assets       (8,856 )
Proceeds from disposition of property and equipment   5,898     38,681  
Proceeds from redemption of trust common securities       909  
Collection of notes receivable related to property sales   2,309     3,509  
Advances on notes receivable   (943 )   (652 )
Purchases of short-term investments       (18,720 )
Sales of short-term investments   18,085     635  
Other, net   77     28  
Net cash used in investing activities   (30,688 )   (30,080 )
Financing activities:        
Borrowings on long-term debt   24,766     90,772  
Repayments of long-term debt   (4,939 )   (30,528 )
Repayment of debentures to Red Lion Hotels Capital Trust       (30,825 )
Debt issuance costs   (181 )   (4,028 )
Proceeds from sale of interests in joint ventures   3,193     23,461  
Distributions to noncontrolling interest   (3,593 )   (2,638 )
Reduction of additional paid in capital for canceled restricted stock units   (353 )   (347 )
Proceeds from common stock offering, net   18,460      
Other, net   180     (20 )
Net cash provided by financing activities   37,533     45,847  
Change in cash, cash equivalents and restricted cash:        
Net increase in cash, cash equivalents and restricted   12,407     29,851  
Cash, cash equivalents and restricted cash at beginning of year   35,202     5,351  
Cash, cash equivalents and restricted cash at end of year   $ 47,609     $ 35,202  

 

Red Lion Hotels Corporation
Additional Hotel Statistics
(unaudited)
 
Systemwide Hotels as of December 31, 2016                                                  
  Hotels      Rooms  
Company operated hotels      
Majority owned and consolidated 14     2,900  
Leased 4     900  
Managed 2     500  
Franchised hotels 1,117     68,900  
Total systemwide 1,137     73,200  

 

Comparable Hotel Statistics from Continuing Operations (1)                
    For the three months ended December 31,
    2016     2015
    Average 

Occupancy(2)

  ADR (3)   RevPAR (4)   Average 

Occupancy(2)

  ADR (3)   RevPAR (4)
Systemwide                        
Midscale   54.5 %   $ 85.88     $ 46.79     56.5 %   $ 84.31   $ 47.65
Economy   49.5 %   $ 64.27     $ 31.83     44.9 %   $ 63.67   $ 28.58
Total systemwide   53.1 %   $ 80.17     $ 42.56     53.3 %   $ 79.54   $ 42.42
Franchised hotels                        
Midscale   50.6 %   $ 84.63     $ 42.82     50.9 %   $ 81.41   $ 41.45
Economy   49.5 %   $ 64.27     $ 31.83     44.9 %   $ 63.67   $ 28.58
Company operated hotels                        
Midscale   58.5 %   $ 87.00     $ 50.92     62.4 %   $ 86.76   $ 54.10
                         
Change from prior comparative period:   Average 

Occupancy(2)

  ADR (3)   RevPAR (4)            
Systemwide                        
Midscale   (200 )  bps     1.9 %     (1.8 )%            
Economy   460    bps      0.9 %     11.4 %            
Total systemwide   (20 )  bps     0.8 %     0.3 %            
Franchised hotels                        
Midscale   (30 )  bps     4.0 %     3.3 %            
Economy   460    bps     0.9 %     11.4 %            
Company operated hotels                        
Midscale   (390 )  bps     0.3 %     (5.9 )%            

 

(1 ) Certain operating results for the periods included in this report are shown on a comparable hotel basis. Comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current reporting year under materially similar operations.
(2 ) Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period and includes rooms taken out of service for renovation.
(3 ) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4 ) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.

 

Comparable Hotel Statistics from Continuing Operations (1)              
    For the year ended December 31,
    2016     2015
    Average 

Occupancy(2)

  ADR (3)   RevPAR (4)   Average 

Occupancy(2)

  ADR (3)   RevPAR (4)
Systemwide                        
Midscale   64.5 %   $ 93.85     $ 60.58     64.6 %   $ 91.78   $ 59.31
Economy   56.4 %   $ 67.73     $ 38.22     53.1 %   $ 67.16   $ 35.65
Total systemwide   62.3 %   $ 87.18     $ 54.28     61.4 %   $ 85.89   $ 52.75
Franchised hotels                        
Midscale   60.5 %   $ 90.54     $ 54.78     59.4 %   $ 87.31   $ 51.85
Economy   56.4 %   $ 67.73     $ 38.22     53.1 %   $ 67.16   $ 35.65
Company operated hotels                        
Midscale   68.7 %   $ 96.88     $ 66.60     70.1 %   $ 95.71   $ 67.06
                         
Change from prior comparative period:   Average 

Occupancy(2)

  ADR (3)   RevPAR (4)            
Systemwide                        
Midscale   (10 )  bps     2.3 %     2.1 %            
Economy   330    bps      0.8 %     7.2 %            
Total systemwide   90    bps      1.5 %     2.9 %            
Franchised hotels                        
Midscale   110    bps     3.7 %     5.7 %            
Economy   330    bps      0.8 %     7.2 %            
Company operated hotels                        
Midscale   (140 )  bps     1.2 %     (0.7 )%            

 

(1 ) Certain operating results for the periods included in this report are shown on a comparable hotel basis. Comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current reporting year under materially similar operations.
(2 ) Average occupancy represents total paid rooms divided by total available rooms. Total available rooms represents the number of rooms available multiplied by the number of days in the reported period and includes rooms taken out of service for renovation.
(3 ) Average daily rate ("ADR") represents total room revenues divided by the total number of paid rooms occupied by hotel guests.
(4 ) Revenue per available room ("RevPAR") represents total room and related revenues divided by total available rooms.

 

Red Lion Hotels Corporation
Comparable Operating Results and Data From Continuing Operations
(unaudited)
($ in thousands)
                 
Certain operating results for the periods included in this report are shown on a comparable hotel basis. With the exception of pro forma economy hotels, comparable hotels are defined as hotels that were in the system for at least one full calendar year as of the beginning of the current period under materially similar operations.
 
We utilize these comparable measures because management finds them a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported operating results. Comparable operating results are not intended to represent reported operating results defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP.
         
    Three Months Ended December 31,   Year Ended December 31,
    2016   2015   2016   2015
Company operated hotel revenue   $ 24,126     $ 25,094     $ 117,641     $ 116,187  
less: revenue from sold and closed hotels   (31 )   (1,014 )   (2,822 )   (8,999 )
less: revenue from hotels without comparable results   (3,266 )   (2,036 )   (12,827 )   (3,441 )
Comparable company operated hotel revenue   $ 20,829     $ 22,044     $ 101,992     $ 103,747  
                 
Company operated hotel operating expenses   20,537     23,479     91,572     92,057  
less: operating expenses from sold and closed hotels   (60 )   (1,053 )   (1,785 )   (6,863 )
less: operating expenses from hotels without comparable results   (2,442 )   (1,740 )   (10,266 )   (3,330 )
Comparable company operated hotel operating expenses   $ 18,035     $ 20,686     $ 79,521     $ 81,864  
                 
Company operated hotel direct operating income   $ 3,589     $ 1,615     $ 26,069     $ 24,130  
less: operating margin from sold and closed hotels   29     39     (1,037 )   (2,136 )
less: operating margin from hotels without comparable results   (824 )   (296 )   (2,561 )   (111 )
Comparable company operated hotel direct income   $ 2,794     $ 1,358     $ 22,471     $ 21,883  
Comparable company operated hotel direct margin %   13.4 %   6.2 %   22.0 %   21.1 %

 

Red Lion Hotels Corporation
Reconciliation of Non-GAAP Measures
(unaudited)
($ in thousands)
 
EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization.  We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.
 
Adjusted EBITDA and Adjusted net income (loss) are additional measures of financial performance.  We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.
 
EBITDA, Adjusted EBITDA and Adjusted net income (loss) are commonly used measures of performance in the industry. We utilize these measures because management finds them a useful tool to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported operating results.  EBITDA, Adjusted EBITDA and Adjusted net income (loss) are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States ("GAAP"), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in our industry may calculate EBITDA and in particular Adjusted EBITDA and Adjusted net income (loss) differently than we do or may not calculate them at all, limiting the usefulness of EBITDA, Adjusted EBITDA and Adjusted net income (loss) as comparative measures.
                 
The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) for the periods presented:
                 
    Three Months Ended December 31,   Year Ended December 31,
    2016   2015   2016   2015
 Net income (loss) $ (3,155 )   $ (7,686 )   $ (4,840 )   $ 4,016  
  Depreciation and amortization 4,927     3,711     16,281     13,315  
  Interest expense 2,011     1,751     6,764     6,979  
  Income tax (benefit) expense 54     48     312     85  
 EBITDA 3,837     (2,176 )   18,517     24,395  
  Gain on asset dispositions (1) (1,519 )   (1,296 )   (1,912 )   (17,808 )
  Loss on early retirement of debt (2)     1,689         2,847  
  Lease termination costs (3)     375         2,250  
  Reserve for environmental cleanup (4)         128      
  Acquisition and integration costs (5) 460     779     2,112     779  
  Separation costs (6) 10         627      
Adjusted EBITDA $ 2,788     $ (629 )   $ 19,472     $ 12,463  
                 
(1 ) In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million.  In the fourth quarter of 2016 we recorded a gain of $1.5 million on the sale of the Coos Bay property.  In the fourth quarter of 2015, we recorded $1.3 million gain on sale of RLHC's portion of the RLH building.  In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties.
(2 ) In the first and fourth quarters of 2015, we recorded $1.2 million and $1.7 million, respectively, loss on the early retirement of our corporate debt and Trust Preferred Securities.
(3 ) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and recorded additional amortized lease termination fees in 2015.
(4 ) In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.
(5 ) On September 30, 2016 RLHC acquired Vantage.  Expenses associated with the acquisition totaling $2.1 million are reflected in the second, third and fourth quarters of 2016.  In the fourth quarter of 2015, we acquired a hotel that was accounted for as a business combination. We recorded $0.8 million in transaction costs.
(6 ) During 2016, we recorded $0.6 million of separation costs of former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition.

 

Red Lion Hotels Corporation
Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)
(unaudited)
($ in thousands)
                       
The following is a reconciliation of adjusted net income to net income (loss) for the periods presented:
                 
    Three Months Ended December 31,      Year Ended December 31,  
      2016       2015       2016       2015  
 Net income (loss)   $   (3,155 )   $   (7,686 )   $   (4,840 )   $   (4,016 )
Gain on asset dispositions (1)     (1,519         (1,296 )       (1,912 )       (17,808 )
Loss on early retirement of debt (2)           1,689             2,847  
Lease termination costs (3)           375             2,250  
Reserve for environmental cleanup (4)                 128        
Acquisition and integration costs (5)     460       779       2,112       779  
Separation costs (6)     10             627        
Adjusted net income (loss)   $   (4,204 )   $   (6,139 )   $   (3,885 )   $   (7,916 )
                 
Adjusted net income (loss) per share       (0.20 )       (0.31 )       (0.19 )       (0.40 )
Weighted average shares - basic     21,230       20,050       20,427       19,983  
Weighted average shares - diluted     21,230       20,050       20,427       19,983  
                 

 

(1 ) In the second quarter of 2016, we recorded a gain on sale of intellectual property, net of brokerage fees, of $0.4 million.  In the fourth quarter of 2016 we recorded a gain of $1.5 million on the sale of the Coos Bay property.  In the fourth quarter of 2015, we recorded $1.3 million gain on sale of RLHC's portion of the RLH building.  In the first quarter of 2015, we recorded $16.4 million in gain on the sales of the Bellevue and Wenatchee properties.  
(2 ) In the first and fourth quarters of 2015, we recorded $1.2 million and $1.7 million, respectively, loss on the early retirement of our corporate debt and Trust Preferred Securities.  
(3 ) In the fourth quarter of 2014, we amended the lease for the Red Lion Hotel Vancouver at the Quay and recorded additional amortized lease termination fees in 2015.  
(4 ) In the first quarter of 2016, a reserve account was recorded for environmental cleanup at one of our hotel properties.  
(5 ) On September 30, 2016 RLHC acquired Vantage.  Expenses associated with the acquisition totaling $2.1 million are reflected in the second, third and fourth quarters of 2016.  In the fourth quarter of 2015, we acquired a hotel that was accounted for as a business combination. We recorded $0.8 million in transaction costs.  
(6 ) During 2016, we recorded $0.6 million of separation costs of former Executive Vice President and Chief Financial Officer and other legal and consulting services associated with the CFO transition.  

During the fourth quarter of 2016, the following 13 converted franchised hotels were opened:

              - Red Lion Inn & Suites, Fargo, North Dakota
  - Red Lion Inn & Suites, Byram, Mississippi
  - Red Lion Inn & Suites, Ontario, Oregon
  - Country Hearth Inn, West Memphis, Arkansas
  - Country Hearth Inn, Maryville, Missouri
  - Americas Best Value Inn, Houston, Texas
  - Americas Best Value Inn, Putnam, Connecticut
  - Americas Best Value Inn, Wiggins, Mississippi
  - Americas Best Value Inn, Bishop, Texas
  - Americas Best Value Inn, Antioch, California
  - Americas Best Value Inn, Georgetown, Colorado
  - Americas Best Value Inn, Maryville, Missouri
  - Americas Best Value Inn, Webster City, Iowa



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